FINANCIAL STATEMENTS Year Ended September 30, 2016
Table of Contents Year Ended September 30, 2016 Introductory Section Title Page Table of Contents 2 City Officials 4 Financial Section Independent Auditors Report 5 Management s Discussion and Analysis 7 Basic Financial Statements Government-wide Financial Statements Statement of Net Position 19 Statement of Activities 21 Fund Financial Statements Governmental Funds Balance Sheet 22 Statement of Revenues, Expenditures and Changes in Fund Balances 24 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 25 Proprietary Fund Statement of Net Position 26 Statement of Revenues, Expenses and Changes in Fund Net Position 27 Statement of Cash Flows 28 Fiduciary Funds (Component Units that are Fiduciary in Nature) Statement of Fiduciary Net Position - Pension Trust Funds 29 Statement of Changes in Fiduciary Net Position - Pension Trust Funds 30 Notes to Financial Statements 31 Required Supplementary Information Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - General Fund 73 Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - Community Redevelopment Agency Fund 74 Budgetary Notes to Required Supplementary Information 75 Schedule of Funding Progress - Other Postemployment Benefits 76 1-2 -
Table of Contents Year Ended September 30, 2016 Required Supplementary Pension Information Schedules of Contributions From the Employer and Other Contributing Entities 77 Schedule of Changes in Net Pension Liability and Related Ratios Police Officers and Firefighters Pension Plan 78 Schedule of Changes in Net Pension Liability and Related Ratios General Employees Pension Plan 79 Schedule of Changes in Net Pension Liability and Related Ratios 80 Notes to Schedules 81 Schedule of Investment Returns 82 Additional Elements Required by Government Auditing Standards and The Rules of the Auditor General Independent Auditors Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 83 Independent Auditors Management Letter 85 Independent Accountants Report on Compliance with Local Government Investment Policies 89-3 -
City Officials Year Ended September 30, 2016 Mayor Frank Catino Vice Mayor Mark Brimer Council Members Lorraine Gott Steve Osmer Dominick Montanaro City Attorney James P. Beadle City Manager Courtney Barker City Clerk Leonor Olexa Assistant City Manager Suzanne Sherman Comptroller Jennifer Howland - 4 -
Carr, Riggs & Ingram, LLC 215 Baytree Drive Melbourne, Florida 32940 (321) 255-0088 (321) 259-8648 (fax) www.cricpa.com INDEPENDENT AUDITORS REPORT To the Honorable Mayor and City Council City of Satellite Beach, Florida Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund and the aggregate remaining fund information of the City of Satellite Beach, Florida (the City ) as of and for the year ended September 30, 2016, and the related notes to the financial statements, which collectively comprise the City s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. - 5 -
Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund and the aggregate remaining fund information of the City of Satellite Beach, Florida as of September 30, 2016, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis on pages 7-15, the budgetary comparison information on pages 73-75, and the defined benefit pension plan information and the other postemployment benefits information on pages 76-82 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City s basic financial statements. The introductory section on pages 1 4 is presented for purposes of additional analysis and is not a required part of the basic financial statements. The introductory section has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 23, 2017 on our consideration of the City s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City s internal control over financial reporting and compliance. Melbourne, Florida February 23, 2017-6 -
- 7 - City of Satellite Beach, Florida Management's Discussion and Analysis As management of the City of Satellite Beach, Florida (the City ), we offer readers of the financial statements this narrative overview and analysis of the financial activities of the City of Satellite Beach, Florida, for the fiscal year ended September 30, 2016. Financial Highlights The assets of the City of Satellite Beach, Florida, exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $21,410,326 (net position). Of this amount, ($5,481,463) represents the unrestricted net deficit due to recording of the net OPEB obligation of $1,861,000; pension liabilities and related deferred inflows and outflows of $4,548,776; and compensated absences of $766,918, which are not currently funded. The City s total net position increased by $228,456. This increase is attributable to fiscal year revenues exceeding expenses, which caused a positive net position increase. As of the close of the current fiscal year, the City of Satellite Beach, Florida s governmental funds reported combined ending fund balances of $3,271,442, a decrease of $2,286,806 in comparison with the prior year. The City of Satellite Beach, Florida s total long-term liabilities decreased by $476,782 during the current fiscal year. The decrease is due to a decrease in notes payable and capital leases of $616,719 offset by an increase in compensated absences of $44,937 and an increase in OPEB of $95,000. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City of Satellite Beach, Florida's basic financial statements. The City of Satellite Beach, Florida s basic financial statements comprise three components: 1) government-wide financial statements (GASB-34), 2) fund financial statements and 3) notes to the financial statements. This report also contains other required supplementary information (RSI) in addition to the basic financial statements themselves. Government-wide financial statements (GASB-34). The government-wide financial statements are designed to provide readers with a broad overview of the City of Satellite Beach, Florida s finances, in a manner similar to a private-sector business. All of the City s activities are reported as governmental activities in the government-wide financial statements. The statement of net position presents information on all of the City of Satellite Beach, Florida s assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City of Satellite Beach, Florida is improving or deteriorating. The statement of activities presents information showing how the City s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. The government-wide financial statements can be found on pages 19-21 of this report.
- 8 - City of Satellite Beach, Florida Management's Discussion and Analysis Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Satellite Beach, Florida, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City of Satellite Beach, Florida can be divided into three categories: governmental funds, proprietary funds and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City of Satellite Beach, Florida, maintains six individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures and changes in fund balances for the General Fund, the Community Redevelopment Agency fund, and the Capital Assets Fund, which are considered to be major funds. Data from the other three governmental funds are combined into a single, aggregated presentation called nonmajor funds. The basic governmental fund financial statements can be found on pages 22-25 of this report. Proprietary funds. Proprietary funds are used to account for business-like activities. There are two types of proprietary funds enterprise funds and internal service funds. In fiscal year 2016, the City established an internal service fund to account for the City s healthcare self-insurance program. The costs of the self-insurance program are accumulated in the internal service fund and are paid for by the departments of the City on a cost-reimbursement basis. The basic proprietary fund financial statements can be found on pages 26-28 of this report. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the City. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the City of Satellite Beach, Florida s own programs. Fiduciary fund financial statements are prepared using the accrual basis of accounting. The basic fiduciary fund financial statements can be found on pages 29-30 of this report.
Management's Discussion and Analysis Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 31-69 of this report. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information (RSI) concerning the City of Satellite Beach, Florida s budgetary compliance, other postemployment benefits and pension obligations. The City of Satellite Beach, Florida adopts an annual appropriated budget for its general fund and all of its major special revenue funds. A budgetary comparison statement has been provided for these funds to demonstrate compliance with the budgets. Required supplementary information can be found on pages 71-82 of this report. Government-wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a City s financial position. In the case of the City of Satellite Beach, Florida, assets exceeded liabilities by $21,410,326 at the close of the most recent fiscal year. The following table reflects the condensed statement of net position: CITY OF SATELLITE BEACH, FLORIDA S Net Position 2016 2015 Current and other assets $ 4,694,853 $ 6,636,503 Capital assets 32,504,301 30,249,354 Total assets 37,199,154 36,885,857 Deferred outflows of resources 5,676,088 1,422,424 Long-term liabilities outstanding 17,624,085 13,364,520 Other liabilities 761,810 455,838 Total liabilities 18,385,895 13,820,358 Deferred inflows of resources 3,079,021 3,306,053 Net position: Net investment in Capital assets 25,272,490 24,900,824 Restricted 1,619,299 4,072,434 Unrestricted (deficit) (5,481,463) (7,791,388) Total net position $ 21,410,326 $ 21,181,870 By far the largest portion of the City of Satellite Beach, Florida s net position reflects its investment in capital assets (e.g., land, buildings, improvements, equipment and infrastructure); less any related debt used to acquire those assets that is still outstanding. The City of Satellite Beach, Florida, uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City of Satellite Beach, Florida reports net investment in capital assets, it should be noted that the resources - 9 -
Management's Discussion and Analysis needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional $1,619,299 of the City s net position represents resources that are subject to external restrictions on how they may be used. At the end of the current fiscal year, the City of Satellite Beach, Florida, is only able to report a positive balance in its net investment in capital assets and restricted net position. The City reported an unrestricted net deficit of ($5,481,463) primarily due to recording of the net OPEB obligation of $1,861,000, compensated absences of $766,918, and aggregate net pension liability of $7,764,356 and related deferred inflows of resources of $2,460,508 offset by deferred outflows of resources of $5,676,088. These liabilities are not currently funded. The following table shows condensed revenue and expense data: CITY OF SATELLITE BEACH, FLORIDA S Changes in Net Position 2016 2015 Revenues: Charges for services $ 1,468,678 $ 1,477,088 Operating grants and contributions 720,966 475,692 Capital grants and contributions 51,185 180,819 General revenues: Property taxes 6,371,353 5,998,358 Franchise fees 1,874,311 1,588,606 Shared revenues not restricted to specific programs 1,134,819 1,079,262 Grants and contributions not restricted to restricted to specific programs 1,484 9,850 Unrestricted investment earnings 32,328 26,277 Miscellaneous 124,410 122,639 Total revenues 11,779,534 10,958,591 Expenses: General government 2,825,504 2,156,505 Public safety 5,170,779 4,454,959 Public works 2,401,705 2,251,199 Recreation 825,813 743,255 Interest on long term debt 327,277 282,025 Total expenses 11,551,078 9,887,943 Increase in net position 228,456 1,070,648 Net position beginning 21,181,870 24,525,750 Prior period adjustment - (4,414,528) Net position beginning, as restated 21,181,870 20,111,222 Net position ending $ 21,410,326 $ 21,181,870 The City s net position increased by $228,456 during the current fiscal year. The increase in net position was largely attributable to increased property tax revenues as a result of increasing property values. - 10 -
Management's Discussion and Analysis Statement of Activities Government-wide Expenses and Program Revenues $5,500,000 $5,000,000 $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 Statement of Activities Government-wide Revenues by Source Expenses Program Revenues Property taxes 53% Capital grants and contributions 0% Operating grants and contributions 6% Charges for services 12% Miscellaneous 1% Unrestricted investment earnings 0% Franchise fees 16% Shared revenues not restricted to specific programs Grants and 10% contributions not restricted to specific programs 2% - 11 -
Management's Discussion and Analysis Financial Analysis of the City s Funds As noted earlier, the City of Satellite Beach, Florida, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the City of Satellite Beach, Florida s governmental funds is to provide information on near-term inflows, outflows and balances of spendable resources. Such information is useful in assessing the City of Satellite Beach, Florida s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a City s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City of Satellite Beach, Florida s governmental funds reported combined ending fund balances of $3,271,442, a decrease of $2,286,806 in comparison with the prior year. The fund balances of nonspendable, restricted or committed indicate that it is not available for new spending because it is obligated for prepaid items ($378,329), restricted for specific purposes ($1,619,299), or committed to pay for obligations previously authorized by the City ($852,745). Unrestricted unassigned fund balance was $421,069 at year end. The General Fund is the chief operating fund of the City of Satellite Beach, Florida. At the end of the current fiscal year, unassigned fund balance was $421,069, while total fund balance was $1,617,411. As a measure of the General Fund s liquidity, it may be useful to compare unassigned fund balance to total fund operating expenditures. Unassigned fund balance is 4.5% of total General Fund expenditures. The fund balance of the City of Satellite Beach, Florida s General Fund decreased by $47,322 during the current fiscal year. The decrease is due to the funding of the first year of the new Health Insurance Fund (Proprietary/ Internal Service Fund), and the second year of salary compression payments to affected employees. This was partially offset by ad-valorem revenues as a result of higher property values and the continuation of the Community Redevelopment Agency Tax Increment return to the General Fund. The Community Redevelopment Agency Special Revenue Fund has a total fund balance of $357,706, which is restricted for the Community Redevelopment Agency special revenue fund activities. The net decrease in fund balance during the current year in the Community Redevelopment Agency (CRA) special revenue fund of $653,465 was due primarily to funding of the state route A1A Mast Arm Project and completion of the Shell Street Project. The Capital Assets Fund has a total fund balance of $1,010,257, all of which is restricted for capital asset purchases. The net decrease in fund balance during the current year in the Capital Assets Fund was $1,914,326. This was due mainly to the Roosevelt Street Improvement and road improvements projects. - 12 -
Management's Discussion and Analysis General Fund Budgetary Highlights Differences between the original budget and the final amended budget (net increase of $28,750 in appropriated expenditures and transfers out) can be briefly summarized as follows: $46,166 in decreases in General Government Services, Legislative, City Clerk s office and Support Services $7,994 in decreases in Recreation $21,122 in decreases in Public Works $3,970 in decreases allocated to transfers out $76,273 in increases allocated to Police and Fire $31,729 in increases in Building and Zoning This increase in expenditures corresponds to a $216,524 increase in revenues and other financing sources as follows; decrease of $25,065 in taxes; $22,639 increase in licenses and permits; increase of $87,536 in intergovernmental; increase of $58,673 in charges for services; decrease in $1,117 in fines and forfeitures; increase of $21,478 in interest and other; and a decrease of $380,668 in appropriated transfers into the General Fund. The above items resulted in a net change of $245,274 whereby the original adopted budget included a positive change in fund balance of $245,771, compared to a net increase in fund balance of $497 per the final amended budget. Capital Asset and Debt Administration Capital assets. The City of Satellite Beach, Florida s investment in capital assets as of September 30, 2016, amounts to $32,504,301 (net of accumulated depreciation). This investment in capital assets includes land, buildings, improvements, equipment, infrastructure and construction in progress. The total increase in the City of Satellite Beach, Florida s investment in capital assets for the current fiscal year was approximately 7 percent. CITY OF SATELLITE BEACH, FLORIDA S Capital Assets (net of depreciation) 2016 2015 Land $ 11,680,950 $ 11,680,950 Buildings 2,408,801 2,503,570 Improvements other than buildings 3,078,100 2,935,290 Equipment 1,670,970 1,777,109 Infrastructure 13,044,733 10,751,805 Construction in progress 620,747 600,630 Total $ 32,504,301 $ 30,249,354 Additional information on the City of Satellite Beach, Florida s capital assets can be found in Note 4.B. on page 46 of this report. - 13 -
Management's Discussion and Analysis Notes payable. At the end of the current fiscal year, the City of Satellite Beach, Florida, had notes payable outstanding of $6,633,525. The City s notes payable balances decreased by $516,965 during the current fiscal year due to scheduled principal payments on the notes. Capital leases payable. At the end of the current fiscal year, the City of Satellite Beach, Florida, had total capital leases outstanding of $598,286. CITY OF SATELLITE BEACH, FLORIDA S Outstanding Debt - Capital Leases 2016 2015 Capital lease City vehicles 312,453 353,508 Capital lease Police Records Mgmt. 285,833 344,532 Total capital leases $ 598,286 $ 698,040 The City s total capital lease obligations had a net decrease of $99,754 (14%) during the current fiscal year due to scheduled principal payments on the leases. Compensated absences. Employees are permitted to accrue earned and unused vacation leave up to a maximum of one and one-half times the annual rate of accrual. Sick leave is permitted to accrue up to 1,080 hours for employees who are scheduled for forty (40) hours a week and 1,620 hours for employees who are scheduled for fifty-six (56) hours a week. Upon termination, with restrictions, employees will be paid fifty percent (50%) of up to seven hundred twenty (720) hours or a maximum of three hundred sixty (360) hours of unused sick leave and one hundred percent (100%) of accrued vacation leave. At the end of the current fiscal year, the City of Satellite Beach, Florida, had total compensated absences of $766,918. Total compensated absences increased by a net amount of $44,937 during the year, which includes additions of $473,303 and reductions of $428,366. It is estimated that $395,146 of these compensated absences will be due within one year based upon average usage over the three prior years. Additional information on the City of Satellite Beach, Florida s long-term debt can be found in Note 4.D. on pages 47 through 51 of this report. - 14 -
Economic Factors and Next Year s Budgets and Rates City of Satellite Beach, Florida Management's Discussion and Analysis Inflationary trends in the region compare to national indices. Among other factors, this was considered in preparing the City of Satellite Beach, Florida s budget for the 2016/17 fiscal year. The City of Satellite Beach, Florida, in 2015/16 did not allocate any additional amount of the total fund balance as a committed balance to be utilized as an emergency reserve per Ordinance 936. In addition, the City decreased the unassigned fund balance by $47,322 from the previous fiscal year. The creation of an emergency reserve in 2013 will assist the City in managing any unforeseen future economic factors that may negatively affect the City. The City is ahead of schedule on building the emergency reserve, therefore, building of this reserve will be delayed over the next few years in order to fund essential capital improvements. In addition, the City anticipates an increase in property values and revenues that will assist the City in maintaining or decreasing millage rates for future budgets while maintaining service delivery. Requests for Information This financial report is designed to provide a general overview of the City of Satellite Beach, Florida s finances for all those with an interest in the City s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Office of the Assistant City Manager, City of Satellite Beach, 565 Cassia Blvd., Satellite Beach, Florida, 32937. - 15 -
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BASIC FINANCIAL STATEMENTS - 17 -
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Statement of Net Position - Government-wide September 30, 2016 ASSETS Cash and cash equivalents $ 3,343,710 Accounts receivable 233,081 Due from other governments 154,226 Prepaid items 378,329 Derivative instrument - interest rate swap 585,507 Capital assets not being depreciated: Land 11,680,950 Construction in progress 620,747 Capital assets, net of accumulated depreciation Buildings 2,408,801 Improvements other than buildings 3,078,100 Equipment 1,670,970 Infrastructure 13,044,733 Total assets 37,199,154 DEFERRED OUTFLOWS OF RESOURCES Deferred outflows related to pensions 5,676,088 Total deferred outflows of resources 5,676,088 The accompanying notes are an integral part of this financial statement. - 19 -
Statement of Net PosiCity of Satellite Beach, Florida Statement of Net Position - Government-wide (continued) LIABILITIES Accounts payable 408,417 Accrued expenses 199,490 Accrued interest payable 100,309 Due to other governments 53,594 Noncurrent liabilities: Due within one year 1,083,316 Due in more than one year 8,776,413 Aggregate net pension liability 7,764,356 Total liabilities 18,385,895 DEFERRED INFLOWS OF RESOURCES Accumulated increase in fair value of derivative instrument - interest rate swap 585,507 Deferred revenue - business tax receipts 33,006 Deferred inflows related to pensions 2,460,508 Total deferred inflows of resources 3,079,021 NET POSITION Net investment in capital assets 25,272,490 Restricted for: Community Redevelopment Agency 355,563 Community services 266,293 Law enforcement 27,898 Capital assets 750,116 Stormwater 219,429 Unrestricted (deficit) (5,481,463) Total net position $ 21,410,326 - - 20 -
Statement of Activities - Government-wide Year ended September 30, 2016 Program Revenues Net (Expense) Operating Capital Revenue and Charges for Grants and Grants and Change in Functions/Programs Expenses Services Contributions Contributions Net Position General government $ 2,825,504 $ 207,372 $ - $ - $ (2,618,132) Public safety 5,170,779 132,088 213,429 1,000 (4,824,262) Public works 2,401,705 497,699 507,187 - (1,396,819) Recreation 825,813 631,519 350 50,185 (143,759) Interest and related costs on long-term debt 327,277 - - - (327,277) Total governmental activities $ 11,551,078 $ 1,468,678 $ 720,966 $ 51,185 (9,310,249) General revenues Property taxes 6,371,353 Franchise fees 1,874,311 Shared revenues not restricted to specific programs 1,134,819 Grants and contributions not restricted to specific programs 1,484 Unrestricted investment earnings 32,328 Miscellaneous 124,410 Total general revenues 9,538,705 Change in net position 228,456 Net position, beginning of year 21,181,870 Net position, end of year $ 21,410,326 - The accompanying notes are an integral part of this financial statement. - 21 -
Balance Sheet - Governmental Funds September 30, 2016 Community Redevelopment Capital Nonmajor General Agency Assets Funds ASSETS Cash and cash equivalents $ 1,105,803 $ 697,006 $ 772,130 $ 531,134 Accounts receivable 144,682-86,368 2,031 Due from other funds 99,532 - - - Due from other governments 154,145 - - 81 Prepaid items 113,249 2,143 260,141 2,796 Total assets $ 1,617,411 $ 699,149 $ 1,118,639 $ 536,042 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 86,147 $ 188,317 $ 108,382 $ 19,626 Accrued expenses 111,195 - - - Due to other funds - 99,532 - - Due to other governments - 53,594 - - Total liabilities 197,342 341,443 108,382 19,626 Deferred inflows of resources: Deferred revenue - business tax receipts 33,006 - - - Fund balances: Nonspendable 113,249 2,143 260,141 2,796 Restricted - 355,563 750,116 513,620 Committed 852,745 - - - Unassigned 421,069 - - - Total fund balances 1,387,063 357,706 1,010,257 516,416 Total liabilities and fund balances $ 1,617,411 $ 699,149 $ 1,118,639 $ 536,042 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. Deferred outflow of resources related to pension earnings are not recognized in the governmental funds; however, they are recorded in the statement of net position under full accrual accounting. Deferred inflows of resources related to pension earnings are not recognized in the governmental funds; however, they are recorded in the statement of net position under full accrual accounting. Internal service funds are used by management to charge the costs of certain activities, such as health care coverage, to individual funds. The assets and liabilities of certain internal service funds are included in governmental activities in the statement of net position. Long-term liabilities, including net OPEB obligation, net pension liability and compensated absences, are not due and payable in the current period and therefore are not reported in the funds. Interest on long-term debt is not accrued in governmental funds but rather is recognized as an expenditure when due. Net position of governmental activities The accompanying notes are an integral part of this financial statement. - 22 -
Total Governmental Funds $ $ 3,106,073 233,081 99,532 154,226 378,329 3,971,241 $ 402,472 111,195 99,532 53,594 666,793 33,006 378,329 1,619,299 852,745 421,069 3,271,442 32,504,301 5,676,088 (2,460,508) 143,397 (17,624,085) $ (100,309) 21,410,326 - - 23 -
Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds Year ended September 30, 2016 Community Total Redevelopment Capital Nonmajor Governmental General Agency Assets Funds Funds Revenues Taxes $ 7,058,425 $ 476,070 $ 761,499 $ - $ 8,295,994 Licenses and permits 869,543 - - - 869,543 Intergovernmental 1,025,845 - - - 1,025,845 Charges for services 709,630 - - 498,455 1,208,085 Fines and forfeitures 43,503 - - 35 43,538 Interest and other 48,359 3,890 59,644 224,636 336,529 Total revenues 9,755,305 479,960 821,143 723,126 11,779,534 Expenditures Current: General government 2,306,770 323,370 85,899-2,716,039 Public safety 4,692,344 - - 104 4,692,448 Public works 1,609,157 - - 131,432 1,740,589 Recreation 778,573 - - - 778,573 Capital outlay - 697,181 2,554,126 7,270 3,258,577 Debt service: Principal retired - 300,400 99,754 216,565 616,719 Interest and other - 167,239 64,560 31,596 263,395 Total expenditures 9,386,844 1,488,190 2,804,339 386,967 14,066,340 Excess (deficiency) of revenues over (under) expenditures 368,461 (1,008,230) (1,983,196) 336,159 (2,286,806) Other financing sources (uses) Transfers in 665,872 902,785 188,870 120,000 1,877,527 Transfers out (1,081,655) (548,020) (120,000) (127,852) (1,877,527) Net other financing sources (uses) (415,783) 354,765 68,870 (7,852) - Net change in fund balances (47,322) (653,465) (1,914,326) 328,307 (2,286,806) Fund balances, beginning of year 1,434,385 1,011,171 2,924,583 188,109 5,558,248 Fund balances, end of year $ 1,387,063 $ 357,706 $ 1,010,257 $ 516,416 $ 3,271,442 - - $ - - - The accompanying notes are an integral part of this financial statement. - 24 -
Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities Year Ended September 30, 2016 Net change in fund balances - total governmental funds $ (2,286,806) Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlay exceeds depreciation in the current period. 2,269,472 In the statement of activities, only the gain (loss) on the sale of capital assets is reported, whereas in the governmental funds, the proceeds from the sale increase financial resources. Thus, the change in net position differs from the change in fund balance by the book value of the capital assets sold. (14,525) The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. This amount is the net effect of these differences in the treatment of long-term debt and related items. 616,719 Some expenses, such as compensated absences, are reported in the statement of activities when earned or incurred. As they do not require the use of current financial resources, they are not reported as expenditures in governmental funds until they have matured. This is the amount of such expenses reported in the statement of activities in the prior year that have matured in the current year. (108,819) Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds. (295,982) Expenses related to the City's net OPEB obligation reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. (95,000) Internal service funds are used by management to charge the costs of certain activities, such as insurance and health care expenses, to individual funds. The net revenue (expense) of the internal service funds is reported with government activities. 143,397 Change in net position of governmental activities $ 228,456 The accompanying notes are an integral part of this financial statement. - 25 -
Statement of Net Position Proprietary Fund Governmental Activities - Internal Service Fund September 30, 2016 Health Insurance ASSETS Cash and cash equivalents $ 237,637 Total assets 237,637 LIABILITIES Accounts payable 5,945 Accrued liabilities 88,295 Total liabilities 94,240 NET POSITION Unrestricted 143,397 Total net position $ 143,397 The accompanying notes are an integral part of this financial statement. - 26 -
Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietary Fund Governmental Activities - Internal Service Fund Year Ended September 30, 2016 Health Insurance Operating revenues: Charges for services $ 1,230,847 Total operating revenues 1,230,847 Operating expenses: Insurance claims and expenses 1,087,450 Total operating expenses 1,087,450 Change in net position 143,397 Net position, beginning of year - Net position, end of year $ 143,397 The accompanying notes are an integral part of this financial statement. - 27 -
Statement of Cash Flows Proprietary Fund Governmental Activities - Internal Service Fund Year Ended September 30, 2016 Health Insurance Cash flows from operating activities: Cash received from interfund services provided $ 1,230,847 Cash payments to suppliers for goods and services (993,210) Net cash provided by operating activities 237,637 Net increase in cash and cash equivalents 237,637 Cash and cash equivalents, beginning of year - Cash and cash equivalents, end of year $ 237,637 Governmental Activities - Internal Service Fund Year Ended September 30, 2016 Health Insurance Reconciliation of operating income to net cash provided by operating activities: Operating income $ 143,397 Adjustments to reconcile operating income to net cash provided by operating activities: Increase (decrease) in liabilities: Accounts payable 5,945 Accrued expenses 88,295 Total adjustments 94,240 Net cash provided by operating activites $ 237,637 The accompanying notes are an integral part of this financial statement. - 28 -
Statement of Fiduciary Net Position - Pension Trust Funds September 30, 2016 ASSETS Receivables: Contributions $ 125,425 Investments, at fair value: Florida Municipal Investment Trust Fund 21,518,437 Total assets 21,643,862 LIABILITIES - NET POSITION Held in trust for pension benefits $ 21,643,862 - The accompanying notes are an integral part of this financial statement. - 29 -
Statement of Changes in Fiduciary Net Position - Pension Trust Funds For the year ended September 30, 2016 ADDITIONS Contributions: Employees $ 222,386 City 903,433 State 259,777 Total contributions 1,385,596 Investment earnings: Net appreciation in fair value of investments 1,663,174 Total investment earnings 1,663,174 Total additions 3,048,770 DEDUCTIONS Benefit payments 1,191,153 Administrative expenses 60,415 Total deductions 1,251,568 Change in net position 1,797,202 Net position held in trust for pension benefits, beginning of year 19,846,660 Net position held in trust for pension benefits, end of year $ 21,643,862 - The accompanying notes are an integral part of this financial statement. - 30 -
Notes to Financial Statements NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. REPORTING ENTITY The City of Satellite Beach, Florida (the City ) was created pursuant to Chapter 73-129, Laws of Florida, in 1957. The City operates under a chartered council-manager form of government. The accompanying financial statements present the government and its blended component units, an entity for which the government is considered to be financially accountable. A blended component unit, although a legally separate entity, is, in substance, part of the government s operations. Blended component units. The Community Redevelopment Agency (the Agency ) was established by the City Council in June 2002 to promote the rehabilitation, conservation and/or redevelopment of the Community Redevelopment Area (the Area ). The Agency is governed by a board comprised of five commissioners who also serve as members of the City Council. Revenue sources for the Agency consist primarily of property taxes from the Area and support from the City s general fund. Any bond issue authorizations are approved by the City Council and the legal liability for the general obligation portion of the Agency s debt remains with the government. The Agency is reported as a major special revenue fund. The City of Satellite Beach police officers and firefighters participate in the City of Satellite Beach Police Officers and Firefighters Retirement System (Police Officers and Firefighters System). The Police Officers and Firefighters System functions for the benefit of these employees and are governed by a five-member pension board of trustees. The City appoints two members and the police and firefighters select two members to serve as trustees. The four-member board elects the fifth member who is appointed by City Council in a ministerial duty to serve as a trustee. The City is authorized to establish benefit levels and to approve the actuarial assumptions used in the determination of contribution levels. The City of Satellite Beach general employees participate in the City of Satellite Beach General Employees Retirement System (General Employees System) if they were hired prior to September 30, 1996 or the General Employees Money Purchase Pension Plan (Money Purchase Plan) if they were hired subsequent to September 30, 1996. Both plans function for the benefit of all regular city employees, but the General Employees System is governed by a five-member pension board of trustees. The City appoints three members and the employees select two members to serve as trustees. The City is authorized to establish benefit levels and to approve the actuarial assumptions used in the determination of contribution levels for the General Employees System and also is financially responsible for funding the Money Purchase Plan. The Police Officers and Firefighters System and the General Employees System are recorded as pension trust funds in the fiduciary funds. Complete financial statements for each of the individual component units may be obtained at the City s administrative offices located at: 565 Cassia Blvd Satellite Beach, Florida 32937-31 -
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) A. REPORTING ENTITY (Continued) Excluded from the reporting entity City of Satellite Beach, Florida Notes to Financial Statements The Satellite Beach Volunteer Fire Department, Inc. is a nonprofit organization separate from the City. This potential component unit is excluded from the reporting entity because the City does not exert significant influence or control over the volunteer fire department, nor does it have the right to the surplus of the volunteer fire department. B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS The government-wide financial statements (i.e., the statement of net position and the statement of changes in net position) report information on all of the nonfiduciary activities of the primary government. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities are those which normally are supported by taxes and intergovernmental revenues. The statement of activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. Program revenues include 1) charges to customers or applicants who purchase, use or directly benefit from goods, services or privileges provided by a given function or segment, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds, proprietary funds and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental or proprietary funds are reported as separate columns in the fund financial statements. C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING AND FINANCIAL STATEMENT PRESENTATION The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. - 32 -
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) City of Satellite Beach, Florida Notes to Financial Statements C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING AND FINANCIAL STATEMENT PRESENTATION (Continued) Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period, except grant revenues, for which the period is twelve months. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, franchise taxes, licenses, charges for services and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the government. The City reports the following major governmental funds: The General Fund is the government s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Community Redevelopment Agency Fund accounts for the resources accumulated and payments made for the rehabilitation, conservation and/or redevelopment of the Community Redevelopment Area. The Community Redevelopment Agency fund is presented separately as a major fund, which is also in compliance with Florida Statute 163.387. The Capital Assets Fund accounts for the proceeds from utility service taxes. These funds are to be used to fund the acquisition and construction of certain capital assets and expenditures for services approved by the City Council that substitute or outsource a capital asset need identified in the capital improvements plan. Additionally, the government reports the following fund type: The Internal Service Fund Health Insurance Accounts for the activity of the City s selfinsurance care program, services are for health care insurance costs provided to other departments of the City on a cost reimbursement basis. - 33 -